Commercial Property - what to do?
Mon, 07/01/2008 - 11:18
Commercial property funds across the board have been suffering over the past few months and many investors are facing a similar decision.
Property is a cyclical investment and generally provides a steady income of between 6-8% - the double digit returns we have seen in recent years have been something of an anomaly and not something you should expert long term. Experts I've spoken to are now suggesting that while returns may struggle over the next year or so they should return to long term averages.
A big factor in your decision will be your other investments - if you have plenty of other investments, you may decide it's worth sticking with the fund as commercial property can be a good diversifier as its not correlated with the stockmarkets. However if it's your life savings we're talking about then it may well be worth quitting your losses and finding an alternative home for your money.
Rachel Lacey is the editor of Moneywise
Sun, 27/01/2008 - 13:33
I have done a lot of research for clients recently on the subject of commercial property. Firstly, the majority of fund managers believe the downturn to be a cyclical correction and perfectly normal after the period of growth. Secondly, commercial property is predicted to be static for 2008 and then see growth again from 2009. Thirdly, your adviser should have recommended the Distribuion Bond as at least a medium term investment i.e. 5 years plus. The reason for this is so that you can afford to ride out any ups and downs. This money should not be your everyday or emergency money. This is especially true for property funds because all providers add a caveat to their terms and conditions stating they have the right to delay actioning your request to cash in, usually for up to six months. We are seeing this caveat being enforced at the moment by companies such as Friends Provident and Scottish Equitable. The reason is so that companies do not have to dispose of commercial property holdings at a bad time. If you can afford to sit tight, I would recommend you do so as property has historically performed well over time. If you cannot afford to do this you will have to get out of the investment with the least penalty possible. Jo Roberts is director of www.needanadviser.com and a Moneywise Ask The Professionals columnist
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I have a distribution bond with Canada Life which is 70% invested in commercial property. This has lost appreciable amounts of money in the past 6 months. My advisor says he can't advise me outside outlining the 3 options: sit tight; move without penalty into another Can Life fund (and consolidate loss); withdraw what I can without penalty and invest elsewhere. Any ideas which will involve minimal risk (if there is such a thing!) as to how I should proceed?